Assume there are only two firms in the wine industry. Assume these firms cooperate and that...
Assume there are only two firms in the wine industry. Assume these firms cooperate and that they only compete with regards to advertising. Both firms know they face the following payoff matrix. Assume this is a one-period game.
Firm A
Increase Advertising Decrease Advertising
Increase 100,100 10,200
Advertising
Firm B
Decrease 200,10 150,150
Advertising
Assume the payoffs are the firm's profits (in millions of dollars).
(A) Given the above payoff matrix, what strategies will Firm A and Firm B pursue?
(B) Assume now that the game lasts 10 periods. What strategies will the firms pursue?
(C) Assume the game never ends. What strategies will the firms pursue?
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